In a setting with dispersed information, monopolistic competition and sticky-prices, a policy authority uncertain about the monetary transmission mechanism reacts prudently to supply shocks. This induces producers to ascribe an excessive importance to their private information when setting prices. To correct the ensuing inefficiency a state-contingent fiscal policy is required. (c) 2023 Elsevier B.V. All rights reserved.
Femminis, G., Piccirilli, G., Optimal policy with dispersed information and uncertain monetary transmission, <<ECONOMICS LETTERS>>, 2023; 46 (229): 111204-111208. [doi:10.1016/j.econlet.2023.111204] [https://hdl.handle.net/10807/267639]
Optimal policy with dispersed information and uncertain monetary transmission
Femminis, Gianluca
;Piccirilli, Giulio
2023
Abstract
In a setting with dispersed information, monopolistic competition and sticky-prices, a policy authority uncertain about the monetary transmission mechanism reacts prudently to supply shocks. This induces producers to ascribe an excessive importance to their private information when setting prices. To correct the ensuing inefficiency a state-contingent fiscal policy is required. (c) 2023 Elsevier B.V. All rights reserved.
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